California SB 261 for Manufacturers, Explained
California’s Climate‑Related Financial Risk Act (SB 261) is paused by a court order, yet it is shaping how large companies assess and disclose climate risk. If your firm sells into California or to customers who do, this rule influences what data they expect from suppliers, including product‑level impacts that LCAs and EPDs can surface. Here’s the practical read manufacturers asked for.
SB 261 in a nutshell
SB 261 requires covered companies doing business in California with over $500 million in annual revenue to publish a climate‑related financial risk report every two years, aligned with TCFD or IFRS S2. Reports describe material risks and the measures to reduce or adapt to them (CARB Draft Checklist, 2025).
The report must be public on the company website. California envisioned a centralized docket for posting links so stakeholders can find reports in one place (Cleary Gottlieb, 2025).
Deadlines, then the pause
The original first‑year timing was post by January 1, 2026 and submit the link to CARB by July 1, 2026. The public docket opened December 1, 2025 (CARB SB 261 Docket, 2025).
On November 18, 2025 the Ninth Circuit granted an injunction pending appeal, and CARB issued an enforcement advisory saying it will not enforce the January 1, 2026 deadline. Companies may voluntarily post and submit while the case proceeds (CARB SB 261 Docket, 2025; AP News, 2025).
Does this touch building products?
Yes, if the manufacturer itself meets the threshold, and indirectly if major customers do. Roughly 4,100 companies were expected to fall under SB 261, which pushes climate‑risk data requests across their supply chains (AP News, 2025).
Public infrastructure owners and large GCs are already standardizing sustainability questionnaires. Product‑level evidence like EPDs helps answer how exposure and mitigation play out for actual materials rather than abstractions.
What the report covers
Think of TCFD as a four‑chapter brief: Governance, Strategy, Risk Management, and Metrics and Targets. SB 261 allows either TCFD or IFRS S2, so teams can use the structure they already know from investor reporting (CARB Draft Checklist, 2025).
Scenario analysis is encouraged for decision‑usefulness, and CARB flagged minimum elements so first‑time reporters focus on material risks and concrete actions, not glossy platitudes (CARB Draft Checklist, 2025).
Penalties and fees
If enforced, inadequate or missing reports can trigger administrative penalties up to 50,000 dollars per reporting year, with amounts tied to facts and good‑faith efforts (Dechert, 2025) (Dechert, 2025).
CARB also funds administration via annual fees assessed on covered entities. The statute authorizes CARB to contract with a climate reporting organization for oversight (Dechert, 2025).
Where EPDs and LCAs fit
SB 261 is enterprise‑level, but product data makes the risk story credible. EPDs quantify embodied impacts, show supplier choices, and support targets for material switching and process improvements that reduce transition risk over time.
LCAs and EPD portfolios double as evidence for procurement. When large buyers ask for climate‑risk mitigation, being able to point to verified product data shortens the back‑and‑forth and keeps bids moving.
A 90‑day playbook to stay ready
- Map coverage. Confirm whether revenue and “doing business in California” place the parent or any subsidiaries within SB 261’s scope (Cleary Gottlieb, 2025).
- Draft the outline. Pick TCFD or IFRS S2 and build a one‑page schema for Governance, Strategy, Risk, and Metrics using existing ESG content (CARB Draft Checklist, 2025).
- Inventory product data. List existing EPDs and LCAs, note reference years, and flag gaps that block credible risk narratives.
- Prioritize hot spots. Identify materials, sites, or suppliers driving most of the footprint or disruption exposure, then tie actions to those levers.
- Prepare the web pathway. Stand up a public landing page and a repeatable posting process so the report can go live quickly when timelines reset (CARB SB 261 Docket, 2025).
Picking an LCA and EPD partner without the headaches
Look for teams that take on the heavy lift of internal data collection and project management, not ones that hand over templates and walk away. Ask how they will align product results to TCFD or IFRS S2 narratives so metrics and targets are consistent across the report.
Publishing flexibility matters. A strong partner can prepare EPDs that fit the program operator preferred by your markets, with predictable timing and verification, and can maintain reference‑year hygiene so updates are painless.
Stay ready, even during the pause
The injunction changes timing, not the direction of travel. Buyers are still requesting climate‑risk detail and product proof, and the rule could snap back after the appeal. Waiting will definately make the scramble worse.
Treat SB 261 as the prompt to organize risk data now. When the timeline reappears, you will already have the evidence and the web path to hit publish.
Frequently Asked Questions
What companies are covered by SB 261?
U.S. entities doing business in California with prior‑year revenues over $500 million must publish a climate‑related financial risk report every two years (CARB Draft Checklist, 2025).
Are the 2026 deadlines still in force?
No. On November 18, 2025, the Ninth Circuit enjoined enforcement pending appeal, and CARB said it will not enforce the January 1, 2026 deadline while the injunction stands (CARB SB 261 Docket, 2025; AP News, 2025).
Do we need EPDs to comply with SB 261?
EPDs are not mandated by the statute, but they provide credible, third‑party verified product data that strengthens risk narratives and mitigation plans within TCFD or IFRS S2 frameworks.
What are the penalties for non‑compliance?
Administrative penalties may reach up to 50,000 dollars per reporting year when SB 261 is enforced, with amounts tied to circumstances and good‑faith efforts (Dechert, 2025).
About the Author
Eric works at the intersection of sustainability, regulation, and business strategy, helping manufacturers navigate the evolving landscape of EPDs and LCAs. Having spoken with hundreds of teams across North America, brings a deep understanding of what drives ROI, what regulators are asking for, and how companies can stay ahead with smart, scalable approaches to environmental reporting.
